San Diego Business Journal Secrets of Growing and Merging the Topic of Entrepreneurs Roundtable

Watch out. Some state lawmakers are trying to gain support for their legislation simply by changing the name. But this "triumph of marketing" could spell trouble for small businesses in the state.

Martyn Hopper, California director of the Washington, D.C.-based small business advocacy group National Federation of Independent Business, said backers of Assembly Bill 181 are trying to paint their proposal as a "living wage" measure. But that disguises its real intentions, he said.

In 1996, when California voters passed Proposition 210, it set a "living wage" of $5.75 per hour as of March 1, 1998. The new legislation, by Assemblyman Paul Koretz, D-West Hollywood, repeats the words "living wage," to make it sound as if it's the logical extension of what Californians voted for five years earlier, Hopper said.

In reality, AB 181 boosts the minimum wage to $7.25 per hour by 2003, and then an additional 50 cents an hour per year for the next three years, he said. It then instructs the state Industrial Welfare Commission to continue making yearly adjustments to the minimum-wage rate , forever.

The problem is that the minimum wage is being marketed as a "living wage" in the first place. That implies that someone with four children and a mortgage payment depend on a minimum wage, Hopper said.

In truth, the minimum wage is really an entry-level wage, paid to a high-school student looking for his first job or to a retiree looking for a little extra income. When minimum wages are increased, these positions disappear, he said.

Meanwhile, the rest of the economy experiences a "minimum wage" of a different sort , the one naturally established by the market. One that for the vast majority of employees will pay a higher rate than any set by government, Hopper said.

These jobs remain unaffected by increases in the minimum wage, while such increases can seriously hurt employees looking for their first job opportunity , or a company that's just getting started, he said.

"(This is) an additional cost to doing business at a time when double-digit increases in health-care premiums workers' compensation and unemployment insurance premiums are also buffeting small-business owners, who remarkably not only employ more than six out of 10 working Californians, but operate on very, very narrow margins of profitability," he said.

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Growing Pains Explained:

Need info on what it takes to keep your company going and growing? Or is your company looking at a merger or acquisition?

Either way, business leaders will have a chance to do just that April 19 at the San Diego Entrepreneurs Roundtable, held at the Hyatt Aventine in La Jolla. Lunch is included at the noon event, said Julie Rausch, executive director of the SDER.

Steve Weber, president and CEO of Web development and consulting firm Z57.com, Inc., will discuss how he took the company, started as a $2,000 investment in a 400-square-foot office, and grew it to a business with revenues of more than $2.7 million for 2000. For this year, Z57.com is projecting revenues of more than $5 million, Rausch said.

Also speaking will be Jim Miller, vice president with Marsh USA Risk & Insurance Services, on solutions for facilitating deals during mergers and acquisitions, she said.

The luncheon will be held from noon to 2 p.m. April 19 at the Hyatt Aventine, at 3777 La Jolla Village Drive. The event is free to SDER members; $50 for nonmembers, Rausch said.

Reservations are required and should be made no later than April 17 at julie@sder.org.

Optimism Could Be Costly:

A lot of small businesses are going to be blindsided in the coming months if they don't watch out.

So said George Cloutier, CEO of Waltham, Mass.-based American Management Services. His warning came during a conference of the nation's mayors, held April 7 and 8 in Washington, D.C.

"(Small business leaders) are thinking about opportunities for growth when they should be focusing on strengthening their profits. If the downturn continues, and financing grows scarce, many small businesses are going to be squeezed and start to fail," he said.

Cloutier's warning to small businesses was sparked by the findings of a new national poll of 500 small business owners. The poll revealed despite concerns about the economy, nearly two-thirds of the owners rate the economic outlook for their own business over both the next six months and the next two years as good to excellent.

Although it was "heartening" that most small businesses are optimistic, that view should be grounded on sound management, Cloutier said.

"I'm concerned that too many small-business owners are ignoring the economic warning flags and forging ahead to build sales and expand their facilities when they should be focusing on profitability. If the downturn continues, companies that focus on building profitability are the ones that will weather the storm best and be in the strongest position to exploit the next upturn," he said.

The poll, commissioned for the conference and conducted by New York, N.Y.-based Global Strategy group, also showed that 27 percent of all companies plan to add employees. Only 4 percent plan to cut staff, with the remainder reporting no change.

Also, 45 percent of business owners believe the economic prospects for their city have improved over the past five years, while only 22 percent believe things have declined, the poll stated.

Send related items to Lee Zion at lzion@sdbj. com or call (858) 277-6359, Ext. 112. The deadline for the April 30 issue is April 20.